“As more apartments are going up in Canberra, I’m finding more people are choosing to live the apartment lifestyle, which is the norm in the rest of the world,” he said.

Advertisement

If current numbers are anything to go by, Mr Stroh, who works for Independent Property Group, is onto something, as the apartment boom in Canberra shows no signs of abating.

Long-time Canberra residents and commentators might watch the city’s changing skyline, particularly to the north, and bemoan a perceived “glut” in the apartment market.

But with a vacancy rate of 0.6 per cent, and a population increase soaking up any oversupply of apartments, the rental market is tight, and rents are some of the highest in the country.

Housing Industry Association economist Diwa Hopkins says that in the last 12 months, detached houses made up just 23 per cent of newly commenced building projects, with non-detached housing, including townhouses and duplexes, but mainly apartments, making up the rest.

“In terms of the actual numbers, we had 3828 multi-units - low and medium non-detached housing products - that were commenced, while for houses, there were 1166 commenced,” she says.

“The apartment market has been very strong. I think what's happened in the ACT is we're at a new normal level of apartment construction, and that's occurred in the last, say, five years or so.”

But while many agree that buying a Canberra apartment is a good punt for a first home buyer or investor, the market is facing a variety of different pressures.

David Shearer, director of project planning at Independent, says the percentage of investors buying in the Canberra apartment market has been heading south for some time.

“It's really accelerated that downward trend in the last 12-18 months, since the ACT government decided to basically hammer investors with massive increases in land tax and rates on apartments,” he says.

“I'd suggest that the increases that the ACT government have effected upon the unit market will be as significant or a larger contributor to rental increases for tenants. Basically, it's already happening - rents over the last 12 months have gone up considerably so that investors can recoup the additional costs in land tax. That's the number one thing that's happened.

"The second thing that's happened is that the motivation for people to buy an investment property has gone backwards in Canberra, significantly. If I go back 15 years ago, we would sell 70 per cent of a development to investors. Now we're selling roughly 25 per cent. That's the difference.”

The rest are to owner-occupiers, many of them first-home buyers; apartments in Canberra are affordable, with median prices below $500,000.

NewActon Nishi in Canberra.Credit:John Gollings

But beyond the ACT, there’s also the current credit squeeze that’s currently troubling buyers in Sydney and Melbourne, which, according to real estate guru Peter O’Malley, is set to hit Canberra in the near future.

The Sydney-based author of Inside Real Estate has been keeping a close eye on Canberra - and other capital cities - and says that while Canberra’s economy is healthy and vacancy rates are tight, the availability of credit as banks tighten their lending criteria is set to become an issue.

“We're seeing right across the marketplace is that the availability of credit is very quickly now the major dominant issue in all markets,” he says.

“And in doing some research, what I've noticed is what I call the absorption rate of what I call the amount stock on market, versus what's selling each month in Canberra, is really falling away. So there seems to be, all of sudden, after travelling quite well, five or six apartments on the market for every one transaction at the moment in desirable apartments in Canberra.”

He says while Canberra and Hobart are currently the best performing cities in terms of real estate, the ACT’s market has peaked.

Loading

“In my view, you're probably looking at or just passed the peak in the ACT market now,” he says.

“Hobart's now slowing, as is Canberra, and you may see a negative reading for calendar year 2019 for the Canberra market, would be my guess, in terms of price performance. You may see a subtle drop in the Canberra market as the availability of credit tightens up. Because frighteningly for everyone, the tightening has not finished.”

His advice to prospective buyers is to “wait 12 months” before purchasing an apartment, especially if you’re an owner-occupier.

“I can see no upward pressure on apartment prices in Canberra from this point on, none,” he says.

“If someone was to buy a Canberra apartment at the moment as an investment, what I would say to them is that's fine, as long as you know you're buying that apartment for yield and not capital growth in the short term.”

According to Shearer, who has spent 30 years working in the property market, Canberrans are fairly conservative when it comes to investments anyway, and don’t tend to speculate on prices going up after they buy.

“Canberra is a very educated, accommodating but very conservative city, so Canberrans pick security over experiment pretty well all the time,” he says.

Loading

“People are not buying an apartment to speculate on a price increase during construction, they're buying an apartment because they intend to own the property for a length of time, to run it as an investment property and basically to eventually pay it off and have the property as retirement income or for whatever other purpose they might want to use it for.”

He’s also more sanguine about the vagaries of the credit squeeze, and the so-called real estate “bubbles” we hear about in bigger cities, where prices skyrocket in “markets that are basically uncontrolled”, he says.

“Canberra is such a controlled environment, we haven't had these big booms in prices, but we also have never had any big downward pressure on prices.”

Mark Edlund, managing director of Clarity Home Loans, also points out that Canberra apartment developments have so far stayed off the exclusions lists of banks wanting to avoid financing investment in non-profitable projects.

“Canberra hasn’t had that bubble effect that warrants close scrutiny - it’s a nice, stable market,” he says.

There’s also the fact that Canberra’s apartment market is in its relative infancy, and is still designed to appeal mainly to singles and couples. Beyond Braddon and the inner city, the market has a long way to go before it begins to explicitly cater to families with children, or older people looking to retire in their own homes.

Shearer reiterates that the apartment market is still juvenile compared to other cities.

“The market hasn't matured yet, people are not prepared to pay enough money for an apartment of the size that you're talking about for it to be a feasible option,” Shearer says.

Canberra hasn’t had that bubble effect that warrants close scrutiny - it’s a nice, stable market.

Mark Edlund, Clarity Home Loans

He says he himself is looking to downsize now that his children have moved out, but that he and his wife had yet to find something that appealed to their demographic.

“You don't want to buy an apartment in a building full of 19-year-olds. You want to be in a building where there's a level of social engagement about your environment,” he says.

“People try to build something that's going to be more appealing to a demographic who's going to really appreciate it, but there's only very small patches of that type of product being built in Canberra.

“But as the market matures, there might be the demand in the market where people are prepared to pay the money that you'd need to get to justify building nice big apartments with nice big balconies that are going to be suitable for families to grow up in, that have got family friendly communal areas. Rather than having communal areas full of gyms and swimming pools, maybe they'll be full of playgrounds and sandpits. It's something that's not yet there.”

Over in Braddon, as he looks out from his balcony over the bustling bars and boutiques of Mort Street, Stroh says he’s already starting to encounter families willing to make the switch to apartment living.

“They’re starting to look at larger inner-city apartments as a preferred alternative to a house in the suburbs,” he says.

In the meantime, Canberra is steadily densifying, although some maintain that the pace is just fine.

“People's perception is driven by seeing cranes around, apartments sticking their heads above the trees, and they think there's so many of them,” says Shearer.

“But if you then started to do a count of how many suburbs in Canberra are getting something built in them, or if you just go round and look at completed developments to see how many of them are actually vacant, all of a sudden you realise it's a totally different reality.”